Following the $3.00 cwt. ($66 /mt or $60 /nt) price increase on hollow structural section (HSS) tubing announced by US mills last week, there has been some concern as to whether domestic HSS prices are rising too much, too fast.
Combined with the $1.50 cwt. ($33 /mt or $30 /nt) price increase a few weeks ago, domestic mills have now increased HSS prices by a total of $4.50 cwt. ($99 /mt or $90 /nt) in June, despite continued slow demand. As a result, the current domestic asking prices for HSS tubing on order shipments beginning July 7 is at about $34.00 cwt. to $35.50 cwt. ($750 /mt to $783 /mt or $680 /nt to $710 /nt) ex-mill, for ASTM A500 Grade A and B, up to 6". Customers still may be able to find spot deals below this range; however, mills are becoming increasingly reluctant to negotiate in order to help achieve the recent price increase.
The US tubing price increases announced in June have been primarily driven by an up-tick in raw material costs - i.e. the flat rolled price increases that have taken place over the last six weeks. A couple weeks ago, after the $1.50 cwt. ($33 /mt or $30 /nt) tubing price increases were announced, distributors questioned whether the increase would stick because tubing demand was below that for flat rolled products, and tubing suppliers were still very much in a "de-stocking mode." Nevertheless, domestic tubing mills received enough positive feedback from customers to go ahead with another, much bolder, price increase.
If successful, these increases may help to establish some normalcy back into the US tubing market. However, a $3.00 cwt. ($66 /mt or $60 /nt) increase is usually not seen when demand is so low, even without the presence of import competition. One distributor told SteelOrbis, "The increase is great if it sticks. But I know that I won't be filling anymore inventory gaps at this rate anyways. There is still too much uncertainty in the market."
Despite the slight upward trend of raw material prices and lack of import competition, tubing inventory levels remain problematic. According to the most recent Metal Service Center Institute (MSCI) monthly shipment and inventory report, based on service center shipment levels, US pipe and tubing inventories had an overhang of about 3.9 months at the end of May, despite tonnage decreasing from an estimated 708,000 nt in April to 662,000 nt in May. With no indication that demand is bound to pick up significantly anytime soon, buyers will most likely be approaching the new domestic offers with caution.
Another question this most recent price increase evokes is what, if any impact this will have on the import market. Over the past couple months, tubing import offers have become increasingly quiet, and even offers from Mexico have all but dried up in recent weeks. But as domestic prices increase, foreign sources may try to test the waters a little to see how much interest they can generate. For the time being, however, any current import offers would still be too high to generate serious buyer interest.